UPDATE 4-Cheap oil smudges Exxon's long-held sterling credit rating

(Adds background on corporate ratings and share buybacks,
paragraphs 3, 6)
By Ernest Scheyder
April 26 (Reuters) - Exxon Mobil Corp (NYSE:XOM) XOM.N lost its
top-tier credit rating from Standard & Poor's on Tuesday for the
first time in almost 70 years, as slumping crude prices crimp
the oil giant's ability to fund projects and return big amounts
of cash to shareholders.
S&P, a unit of McGraw Hill Financial Inc MHFI.N , cut
Exxon's rating to "AA+" from "AAA," a one-notch demotion that
leaves drugmaker Johnson & Johnson (NYSE:JNJ) JNJ.N and Microsoft Corp
MSFT.O as the only U.S. companies with the coveted, sterling
rating that dozens of U.S. corporations enjoyed in the 1980s.
Though the downgrade was a symbolic blow for a company that
prides itself on strength and discipline, the new S&P rating for
Exxon is still as high as its ratings for the U.S. government
bonds, widely seen as among the world's safest investments.
Only two other U.S. companies, General Electric (NYSE:GE) Co.
GE.N and Apple Inc. AAPL.O , have S&P's "AA+" rating.
Shares of Exxon, which is slated to post quarterly results
on Friday, shrugged off the news, rising 0.34 percent to close
at $87.63.
Exxon and other energy companies have been under pressure to
return money to shareholders. It spent $210 billion on share
repurchases over the last decade, and during the fourth quarter,
paid out $3.6 billion in dividends and share repurchases, more
than it earned.
Filings with U.S. regulators show that at a combined $325
billion in dividends and repurchases, Exxon's spending on
shareholders in the last 11 years has exceeded by nearly 20
percent its outlays for new property, plant and equipment of
$271.7 billion in the same run, which account for the majority
of its capital and exploration expenditures.
But in February, with oil prices having fallen in half since
mid-2014, Exxon changed course and said it would only repurchase
shares to offset dilution, as opposed to returning cash to
shareholders.
Still, S&P said Exxon's debt level had more than doubled in
recent years due to growth projects including liquefied natural
gas export facilities in Papua New Guinea, as well as dividends
and other items, with overall spending exceeding cash flow.
In a statement about the downgrade, the world's largest
publicly traded oil company made no indication it would make
further changes in response to S&P move.
"Nothing has changed in terms of the company's financial
philosophy or prudent management of its balance sheet,"
ExxonMobil spokesman Scott Silvestri said.
Exxon added it values its strong credit position and will
keep focusing on long-term shareholder value despite oil market
volatility.
Moody's in February affirmed its "Aaa" rating for Exxon with
a negative outlook. At the time, it encouraged the company to
invest more in replacing declining reserves.
Last quarter, Exxon executives said they felt it was
"important" to be ranked at the top of the ratings scale, as the
rating was a sign of their superior business management amid the
more-than 60 percent drop in oil prices since 2014.
"We get value from the 'AAA' credit rating," Jeff Woodbury,
Exxon's vice president of investor relations, said on a February
conference call in reference to cheap funding costs guaranteed
by high ratings.
The downgrade was not a complete surprise. In February, S&P
downgraded rival Chevron Corp (NYSE:CVX) CVX.N and warned that such a
move was possible for Exxon also.
"We believe the company may return cash to shareholders
rather than building cash or reducing debt, limiting improvement
in our projected credit measures when commodity prices improve,"
S&P analysts in a press release on Tuesday.
The downgrade comes as Exxon fights accusations it misled
investors and the public about the risks of climate
change.